Exam 6: Provisions, Contingent Liabilities and Contingent Assets

According to AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the appropriate treatment for a contingent asset in the financial statements of an entity is:

Which of the following is not within the scope of AASB 137?

The following statement, contained in AASB 137 Provisions, Contingent Liabilities and Contingent Assets, defines: ' a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity'

Under AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the appropriate accounting treatment for future operating losses is to:

At balance sheet date, Raschella Limited was awaiting the final details of a court case for damages awarded in its favour. The amount and possible receipt of damages is unknown and will not be decided until the court sits again in several months time. How is this event dealt with in the preparation of the financial statements?

An event that gives rise to a present obligation, but which cannot be measured with sufficient reliability is an example of a:

Provisions shall be recognised when: I an entity has a present obligation II it is possible that an outflow of resources will be required to settle the obligation III the amount of the obligation can be reliably estimated IV there has been a past event

The costs under an onerous contract are measured using which valuation method?

In respect to a contingent liability, AASB 137 Provisions, Contingent Liabilities and Contingent Assets, requires disclosure of

An entity sells goods under warranty and past experience shows that minor defects account for 10% of sales and major defects account for 2% of sales. If all minor defects were repaired the warranty cost would be $300 000, and if all major defects were repaired the warranty cost would be $800 000. The expected value of the warranty cost is: